The U. Was this page helpful to you? Thank You! Let us know how we can better serve you! Give Us Feedback. But, there are additional business structures as well, some of which could be the right fit for your company. The following two are business entities that are not considered corporations. An S corporation is a business entity that passes almost all finances through to its shareholders. These finances include income and losses, as well as tax deductions and credits. By passing all of these finances through to shareholders, S corporations are able to be taxed like a partnership but gain corporate perks.
More specifically, this means that shareholders are responsible for income and loss. The S corp pays specific corporate taxes pertaining only to passive income and gains outside what the shareholders keep. This allows S corps to avoid the double taxation that often comes with C corps. Before those shareholders see their profit, your company first has to pay corporate taxes on the income generated.
Then, the already-taxed money is paid out to the shareholders as profit, who report it on their personal tax returns and pay tax again. With an S corp, the profits are passed directly to the S corp shareholders, meaning shareholders are responsible for the taxes. This allows the S corporation to avoid corporate tax, as the profits are being taxed at a personal level when the shareholders report it on their income tax returns. But, there's a catch: any shareholders of an S corp can't be corporations, nor can they be partners with the company.
This means shareholders are generally part of a trust or estate, or are individuals and non-profits. This limits who can be a shareholder, but again, allows you to take advantage of lower corporate taxes in many cases. S corporations can be general partnerships, LLCs, or corporations, making them rather flexible. While there are certain tax benefits, it's worth noting the IRS tends to pay extra attention to S corporations.
This is because the structure provides loopholes through which shareholders may try to evade taxes. For example, an S corp could claim employee pay is actually a distribution and avoid taxes.
A C corporation is similar to an S corporation, in that it can be a partnership, corporation, or LLC. A C corp is also privy to certain tax benefits, chief of which is that the profits of the company are taxed independently of the profits of the owners. Unlike S corps, a C corp can have any number of shareholders from any background.
This means C corp shareholders can also be employees of the corporation itself. But, a C corp must have a board of directors. The board of directors acts as the decision-makers for the company, while the shareholders are more like the financial backing. C corporations can be hit with double taxation, however, which happens when the profits of the company are taxed at the corporate level and then again on individuals' income tax returns.
This is often avoided by spreading profits out to employees as benefits, which allows the corporation to be taxed at a lower rate on a personal tax return. But, this complicated corporate structure often necessitates an account or financial advisor, which is an added cost.
If your plan is to grow your business and eventually sell it, a C corporation can be a great way to keep your personal assets as a separate legal entity from your professional corporation. The ability to have a number of shareholders, even those from other corporations, gives C corps great growth potential, too. Just remember: you will likely incur financial costs in the form of paying advisors, especially come tax time.
One potential disadvantage of the corporate form from the point of view of its founders is that, as the corporation grows, the original founders may lose control and even be pushed out of the corporation by newcomers. This situation can arise because, as a company grows, the founders may be tempted to part with some portion of their equity by selling stock to new investors.
Corporations are ultimately controlled by the board of directors, who are voted into office by the shareholders. Although the tremendous growth in the number and size of corporations, and their ever-increasing social role, is due in part to their advantages as an investment vehicle, there are some financial disadvantages worth mentioning.
One of the most important is so-called dual taxation, which refers to the practice in most countries of taxing corporate profits twice: once when the corporation declares a certain amount of profit, and again when the corporation distributes dividends to shareholders. The complexity of corporate tax regulations is such that even small corporations must frequently employ specialized accountants and attorneys to handle their tax returns.
Another disadvantage applies only to publicly traded corporations. Although all corporations are subject to a number of government regulations, the highest degree of regulation applies to public corporations, which raise capital by selling stock in stock markets. Large corporations are often willing to submit to these burdensome regulations because there are strong benefits to being traded on a stock exchange, the most important of which is the ability to raise a great deal of initial funding when the stock is first made available for trade.
Despite the allure of additional financing, a company that is traded on a stock market must make a great deal of financial information publicly available, usually on a quarterly basis, four times per year.
This obligation can be quite onerous because it requires the corporation to employ a number of internal accountants as well as outside auditors.
In light of these disadvantages, it is not surprising that some public corporations decide to take their shares off the stock markets in a process that is known as going private , which is the opposite of an IPO. Other corporations simply avoid going public in the first place.
Thus, there are also some very large corporations, such as the multi—billion-dollar engineering firm Bechtel, which prefer to remain private even though they could raise investment capital with an IPO. Such companies prefer to raise capital by other means to avoid the requirements of quarterly earnings reports and therefore not revealing financial information to competitors. In this book, we will make continual reference to the concept of corporate social responsibility, but it is important to realize that CSR is an evolving concept that can be analyzed from multiple perspectives.
The term CSR may be used quite differently depending on whether a given speaker is looking at it from the point of view of a corporation, a government, a charity sponsored by the corporation, a citizen employed by the corporation, a citizen who has been harmed by the corporation, or an activist group protesting abuses of corporate power.
We define CSR simply and broadly as the ethical role of the corporation in society. Corporations themselves often use this term in a narrower, and less neutral, form. At a minimum, most corporations expect that their donations will be publicly attributed to the corporation, thus generating positive public relations.
When corporations make large cash gifts to universities or museums, they are usually rewarded with a plaque, or with a building or library named after the donor. Stakeholder capitalism refers to a conception of the corporation as a body that owes a duty not only to its shareholders the predominant American view but also to all of its stakeholders , defined as all those parties who have a stake in the performance and output of the corporation.
Stakeholder capitalism is a concept that was largely developed in Europe and reflects the widespread European attitude toward corporate governance, which accepts a great degree of government and social oversight of the corporation. This is intended to oblige the corporation to be more cognizant of worker needs and demands, and to ensure that corporate strategies are not concealed from workers.
An example is provided by the famous Red campaign, in which corporations such as Gap pledged to contribute profits from the sale of certain red-colored products to a program for African development and alleviation of AIDS-related social problems. The basic idea of cause-related marketing is that the corporation markets its brand at the same time that it promotes awareness of the given social problem or civic organization that addresses the social problem.
In addition to marketing products with the pink-ribbon symbol, Estee Lauder has made support for breast cancer awareness one of the defining features of its corporate philanthropy. Sponsorship can be considered a form of marketing communications because it seeks to raise awareness and appreciation of the corporation in a given target audience.
Arguably, of course, sponsorship benefits society, because society appreciates sports, art, and entertainment. However, in the case of sponsorship, as opposed to philanthropy, the sponsors expect a clear return. Indeed, many corporations carefully analyze the benefits of their sponsorship activities in the same way they measure the impact of their marketing and advertising.
Many prominent global sponsors are companies that find it difficult to advertise through other channels. Philip Morris has long been the number one sponsor of Formula 1 race car competitions, and it is impossible for a spectator to watch one of these races without observing, consciously or otherwise, huge billboards and banners featuring the famous red-and-white Marlboro logo.
Similarly, since alcohol advertising is also increasingly scrutinized, it is not surprising that Budweiser has followed a similar tactic and become the principal sponsor of NASCAR racing. Sustainability has become such an important concept that it is frequently confused with CSR. Indeed, for some companies it seems that CSR is sustainability. This is perhaps not surprising, given the growing media attention on issues related to sustainability.
Sustainability is therefore a very challenging goal, and many environmentalists maintain that no corporation today operates sustainably, since all use energy leading to the gradual depletion of fossil fuels while emitting greenhouse gases and all produce waste products like garbage and industrial chemicals. No corporation or corporate executive today will be heard to say that they do not really care about the environment. However, if we observe their actions rather than their words, we may have cause for doubt.
We will explore specific cases related to sustainability in later chapters. More recently, many people have been using the term sustainability also to refer to social and political sustainability, which brings the concept closer to that of CSR. Greenwashing refers to corporations that exaggerate or misstate the impact of their environmental actions.
As a result, many advertising regulatory bodies around the world adopted specific advertising codes to regulate the honesty and accuracy of environmental claims in advertising. The advertisement was found to be misleading because most paper products sold in the UK were not made from wood in tropical rainforests, but from wood harvested on northern European tree farms.
In Norway, car manufacturers and dealers are prohibited from claiming that their cars are green, eco-friendly, etc. Greenwashing is not only a corporate practice but a political one as well, as politicians everywhere promise to undertake actions to improve the environment.
Social entrepreneurship and social enterprise refer to the use of business organizations and techniques to attain laudable social goals. As we will discuss further in Chapter 6, Blake Mycoskie decided to create TOMS Shoes largely as a reaction to his travels in Argentina, which had exposed him to terrible poverty that left many school-age children without shoes.
An important part of the corporate mission of TOMS Shoes lies in its pledge to give away a free pair of shoes for every pair purchased by a customer. The difference between social entrepreneurship and CSR is that, with social entrepreneurship, the positive social impact is built into the mission of the company from its founding. The Body Shop was founded by noted activist Anita Roddick who insisted that all products be derived from ingredients which were natural, organic, and responsibly sourced.
Her employment policies famously allowed every employee to take off one day a month from work to engage in social or community projects. Social marketing refers to the use of business marketing techniques in the pursuit of social goals. Often, governments and nonprofit organizations make use of social marketing to make their points more forcefully and effectively to a wide audience. Classic examples are the extremely powerful TV commercials warning of the dangers of unsafe driving or of failing to use seatbelts.
Cinematic techniques are employed to portray dramatic, arresting images of crumpled cars and bodies, children and mothers crying.
The source of social marketing advertisements is usually a local government or nonprofit organization. Social marketing is usually used to try to convince citizens to drive more safely, eat better, report child and domestic abuse, and avoid various forms of criminality and drug use. As with ordinary advertising, social marketing can seem overdone or maudlin, and some social marketing ads have been mocked or considered silly.
Business ethics is an academic discipline closely related to CSR, but one that tends to use the tools of philosophy to formally analyze the ethical role of individuals and corporations. Although the terms are quite similar, there are differences of nuance. For example, although academics who study business ethics tend to focus on corporations, the term itself could also apply to the ethical dilemmas of sole proprietors or of individuals involved in commercial situations, such as a private party trying to sell a used car that he knows has a hidden mechanical flaw.
While the term CSR tends to be used by corporations and social entrepreneurs in a way that assumes a positive connotation, business ethics is used in a more neutral and even critical fashion, as one might expect, given the perspective of writers who are not beholden to corporations. Indeed, when the media uses the term business ethics , it is often in a negative sense, to draw attention to instances of deception or fraud on the part of corporations or executives.
White-collar crime refers to fraudulent or financially-oriented criminal activities by high-status professionals or businesspeople. However, a distinction should be drawn between white-collar crime and corporate crime, which refers to crimes for which the corporation itself is responsible. In many cases, such as in violations of US laws against bribing foreign government officials, it may be unclear whether the matter is better classified as white-collar crime or corporate crime.
While there is a popular perception that punishments for wealthy white-collar criminals are less severe than for poor and middle-class criminals, the situation appears to have changed in light of the severe penalties for white-collar crime mandated by the Sarbanes—Oxley Act, which was adopted by the US Congress in the wake of the notorious Enron scandal.
Bernie Ebbers, former CEO of WorldCom, was convicted of fraudulent misstating of billions of dollars of WorldCom earnings, resulting in a sentence of 25 years. It is one of the basic premises of this book that we do not want you merely to read and assimilate the material. We want you to engage it personally in an effort to develop and refine your own opinions. Therefore, each chapter will feature a topic for debate more detailed rules and suggestions for debate will be set forth in the next chapter.
Most chapters will feature an in-depth case study based on a real-life business situation, or a fictionalized account of a real business situation or social controversy. Your close friend, Jane Goodie, is a college student who has registered to vote in her first election. As Jane grew up, she often listened to her parents debating politics at the dinner table.
More than once, Jane found herself disconcerted and discouraged by the appearance of biased thinking on the part of one or both of her parents; they rarely seemed to agree or listen to each other in their political debates. But first she must make up her mind. Since this is not a presidential election year, the most important office up for election is that of Senator. Both senatorial candidates are very impressive and illustrious people: One is a graduate of Harvard Law School, the other of Yale Law School.
Both candidates appear to be exceptionally bright, eloquent, and dedicated to public service. In this particular campaign, they both espouse very similar views on foreign policy and social policy. In fact, the main difference between the candidates comes down to one thing: their attitude toward government regulation of business, and of large corporations in particular.
The Democratic candidate, citing recent examples of fraud, pollution, and layoffs at major corporations, is calling for tighter regulation of corporations.
0コメント